SACRAMENTO — Gov. Arnold Schwarzenegger and legislative leaders continued to hunker down Friday in hopes of navigating the state out of its latest budget mess. But the thorny question of how and where to find more money continued to frustrate negotiations.

While several money-generating ideas are under discussion — such as raising annual car registration fees and imposing a new tax on oil extraction — none has gained the support of GOP leaders. Because tax increases require a two-thirds vote in California, at least two Republican senators and six Assembly members would need to go along.

A week of long but so far fruitless talks left little hope that lawmakers would agree soon on a fix to the massive $11.2 billion deficit that has materialized in just the past few months. That shortfall is for the current fiscal year ending in June; looking a year beyond, the deficit could reach a combined $28 billion by mid-2010, budget forecasters estimate.

But despite a situation both Democrats and Republicans acknowledge has ballooned into a full-blown crisis, the Legislature remains paralyzed by ideological differences — primarily over raising taxes but also over how deeply to cut services. Republicans say increasing taxes would plunge the economy into even deeper trouble, while Democrats insist the problem is simply too big to solve with cuts alone.

In one sign of how far apart the two sides remain, Democratic leaders canceled Sunday votes in the Assembly and Senate on a yet-to-be-decided budget plan. The leaders now hope to take action Tuesday, the last day they say votes can occur before new lawmakers are sworn in Dec. 1.

Schwarzenegger earlier this month called the special session because he said the budget crisis could not wait for the new Legislature to be seated. But while the governor proposed an ambitious package of cuts and tax hikes to fix the shortfall, Capitol insiders say the best that might come from the special session is a partial solution.

“We’re still committed to getting a big piece of this done before the new session,” the incoming Senate Democratic leader, Darrell Steinberg, said after a two-hour negotiating session Friday morning.

Throughout the week, legislative leaders declined to divulge details of their talks with the governor. But Capitol sources say several money-generating ideas are under discussion:

Increasing the sales tax, which Schwarzenegger recently proposed raising by 11/2 cents on the dollar. Democrats dislike the idea because sales taxes tend to hit lower-income residents disproportionately, and it’s unlikely they would agree to that large a boost.

Imposing a 9.9 percent tax on oil extraction in the state, also suggested by the governor and backed by Democrats.

Tripling the annual vehicle license fee, or “car tax” as it’s commonly known, from 0.65 percent of a car’s value, to 2 percent — the level before Schwarzenegger slashed the fee in one of his first acts as governor. The owner of a $25,000 car would pay $500 under the new tax, up from $162.50 currently. Estimates of how much the proposal would generate range from $4.7 billion to $6 billion a year.

While Democrats and budget experts tout the vehicle fee as a stable source of revenue — no small point considering how volatile the state’s tax structure is — the proposal is politically hazardous. For Schwarzenegger, signing on would represent an about-face of gigantic proportions; in his 2003 recall campaign, he pummeled former Gov. Gray Davis relentlessly for increasing the tax during the state’s last economic downturn.

And unlike the sales tax, which is paid in small amounts throughout the year, the car tax comes due in one big bill, making it all the more unpopular.

Still, with the state’s financial situation so dire, the governor may have little choice but to accept whatever new revenues he can get, and he recently has signaled some openness to raising the vehicle fee.

But without GOP support in the Legislature, any proposed tax increase is bound to languish. And so far, neither the Republican governor nor Democratic leaders have been able to win over legislative Republicans.

What it would take to get them on board remains the key to negotiations. Democrats last year rebuffed the GOP’s call for a strict, 5 percent annual cap on state spending growth; now, some variation of that proposal is back on the table.

But that still may not be enough. “A spending cap is important to Republicans,” said Assembly GOP leader Mike Villines of Fresno, “but it’s not the be-all, end-all. The important thing is fixing the budget structurally once and for all.”

Translation: Deeper spending cuts than Democrats so far have been willing to entertain.

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